2

CUSTOMER RELATIONSHIP

MANAGEMENT

2.1

INTRODUCTION

7-9

2.2

MEANING OF CRM

10

2.3

GOALS OF CRM

11-13
3

CUSTOMER RELATIONSHIP MANAGEMENT IN

BANKS

14

3.1

INTRODUCTION

15-17

3.2

OBJECTIVES OF CRM IN BANKS

18-20

3.3

NEED OF CRM IN BANKS

21-23
3.4

CRM STRATEGIES

24-28

CUSTOMER RELATIONSHIP MANAGEMENT IN

INDIAN BANKS

29

4.1

CRM IN INDIAN BANKS

30-33

4.2

IMPORTANCE OF CRM IN INDIAN BANK

34-36

4.3
3IMPLEMENTATION OF CRM IN INDIAN BANKS

37-39

4.4

CUSTOMERS RELATIONSHIP MANAGEMENT– A

NEW MANTRA IN INDIAN BANKING

40

4.5

CRM PRINCIPLES

41-48

BENEFITS OF CRM

49

5.1

BENEFITS OF CRM TO BANKS

50-57

5.2

BENEFITS OF CRM TO CUSTOMERS

58-60

CHALLENGES FOR CRM IMPLMENTATION

61

6.1

CHALLENGES FACED BY BANKS IN

SUCCESSFUL IMPLEMENTATION OF CRM

62-66

6.2

METHOD OF EFFECTIVE CRM

IMPLEMENTATION
67-70

RECOMMENDATION

71-72

CONCLUSION

73-74

BIBLIOGRAPHY

75INTRODUCTION TO CRM

2.1 INTRODUCTION
 CRM, or Customer relationship management, is
a number of strategies and technologies that are used to
build stronger relationships between companies and their
customers. A company will store information that is
related to their customers, and they will spend time
analyzing it so that it can be used for this purpose. Some
of the methods connected with CRM are automated, and
the purpose of this is to create marketing strategies
which are targeted towards specific customers. The
strategies used will be dependent on the information that
is contained within the system. Customer relationship
management is commonly used by corporations, and
they will focus on maintaining a strong relationship with
their clients.

There are a number of reasons why CRM has

become so important in the last 10 years. The
competition in the global market has become highly
competitive, and it has become easier for customers to
switch companies if they are not happy with the service
they receive. One of the primary goals of CRM is to
maintain clients. When it is used effectively, a company
will be able to build a relationship with their customers
that can last a lifetime. Customer relationship
management tools will generally come in the form of
software. Each software program may vary in the way it
approaches CRM. It is important to realize that CRM is
more than just a technology.

Customer relationship management could be

better defined as being a methodology, an approach that
a company will use to achieve their goals. It should be
directly connected to the philosophy of the company. It
must guide all of its policies, and it must be an important
part of customer service and marketing. If this is not
done, the CRM system will become a failure. There are a
number of things the ideal CRM system should have. It
should allow the company to find the factors that interest
their customers the most. A company must realize that it
is impossible for them to succeed if they do not cater to
the desires and needs of their customers. Customer
relationship management is a powerful system that will
allow them to do this.

It is also important for the CRM system to foster

a philosophy that is oriented towards the customers.
While this may sound like common sense, there are a
sizeable number of companies that have failed to do it,
and their businesses suffered as a result. With CRM, the
customer is always right, and they are the most important
factor in the success of the company. It is also important
for the company to use measures that are dependent on
their customers. This will greatly tip the odds of success
in their favor. While CRM should not be viewed as a
technology, it is important to realize that there are end to
end processes that must be created so that customers can
be properly served. In many cases, these processes will
use computers and software.

Customer support is directly connected to CRM.

If a company fails to provide quality customer support,
they have also failed with their CRM system. When a
customer makes complaints, they must be handled
quickly and efficiently. The company should also seek to
make sure those mistakes are not repeated. When sales
are made, they should be tracked so that the company
can analyze them from various aspects. It is also
important to understand the architecture of Customer
relationship management.

The architecture of CRM can be broken down

into three categories, and these are collaborative,
operational, and analytical. The collaborative aspect of
CRM deals with communication between companies and
their clients. The operational aspect of the architecture
deals with the concept of making certain processes
automated. The analytical aspect of CRM architecture
deals with analyzing customer information and using if
for business intelligence purposes. Each one of these
elements are critical for the success of a CRM system. A
company must learn how to use all three properly, and
when they do this proficiently, they will be able to build
strong customer relationships and ensure their profits for
a long period of time. As more businesses continue to
compete on a global level, it will become more important
for them to use successful Customer relationship
management techniques.

CRM OVERVIEW
2.2 MEANING OF CRM

Customer Relationship Management is the

establishment, development, maintenance and
optimization of long-term mutually valuable
relationships between consumers and the organizations.
Successful customer relationship management focuses
on understanding the needs and desires of the customers
and is achieved by placing these needs at the heart of the
business by integrating them with the organization's
strategy, people, technology and business processes.

At the heart of a perfect CRM strategy is the

creation of mutual value for all the parties involved in
the business process. It is about creating a sustainable
competitive advantage by being the best at
understanding, communicating, and delivering, and
developing existing customer relationships in addition to
creating and keeping new customers.

DEFINITION OF CRM
 “Customer Relationship Management (CRM) is a co-
ordinate approach to the selling process allowing the
various operational, customer contact and sales
promotional functions of an organization to function as a
whole.”

2.3 GOALS OF CRM

Implementing customer relationship management
can be a costly undertaking. Organizations spend a lot of
money scrutinizing vendors, buying the right CRM
software, hiring, consultant, training employees, etc. The
only way in which a company can actually measure its
success is if it establishes CRM goals prior to the
implementation as in this way it is able to determine
whether or not it has successfully implemented CRM.
Despite the fact that industries have different business
aspects they share some common CRM goals.

Some of the Commonly Established CRM Objectives are

as follows:

1) Increase in Customer Service :

 Establishing customer loyalty as one of your top
CRM goals is absolutely fundamental to CRM
successful implementation .For this task it is essential
that the whole organization realize that they play a part
in this goal. This objective cannot be achieved with the
help of a few employees only. Customers need to feel
that they have received excellent service. This ensures
their continued patronage. This is by far one of the most
essential goals of customer relationship management.
Customer retention and brand loyalty is absolutely
essential to ensure success. Undoubtedly it is far harder
to gain a new customer than to actually keep one.
Customer service is the pivotal point around which CRM
revolves.

2) Increasing Efficiency:

One of the most important goals of CRM is the

increase in organization efficiency and effectiveness.
This is almost always adopted by every organization. It
is necessitated by the fact that increase in efficiency is
required to boost success. CRM achieves this through
cost reduction and customer retention. Adequate CRM
training achieves this goal.

3) Lowering Operating Costs:

 CRM goals also include the reduction of costs of
operation. This goal should be clearly established and
conveyed to all those involved in the CRM
implementation process. CRM manages to reduce
operating costs through a workforce management
system. This helps to maximize skills and thus reduce
cost. These reduced costs enable an organization to
achieve greater efficiency. If cost reduction is
management's objective then the CRM implementation
should be carried out in such a way that this is achieved.
Throughout the process maximum reduction in costs
should be adhered to in order to meet this particular
CRM goal.

4) Aiding the Marketing Department:

Another goal of CRM is generally aiding the

marketing department in all its efforts. This includes
marketing campaigns, sales promotions etc. If this is
fixated as one of the goals of CRM, then it should be
communicated to those involved. This goal is
fundamental as it boosts sales indirectly thereby
increasing the profitability.
Chapter-3

CUSTOMER

RELATIONSHIP

MANAGEMENT

IN BANKS
chapter
3.1 INTRODUCTION

Today, customers have more power in deciding

their bank of choice. Consequently, keeping existing
customers, as well as attracting new ones, is a critical
concern for banks. Customer satisfaction is an important
variable in evaluation and control in a bank marketing
management. Poor customer satisfaction will lead to a
decline in customer loyalty, and given the extended
offerings from the competitors, customers can easily
switch banks. Banks need to leverage effectively on their
customer relationships and make better use of customer
information across the institution.

Competition in the financial services industry has

intensified in recent years, owing to events such as
technology changes and financial industry deregulation.
Conventional banking distribution has been gradually
supplemented by the emerging use of electronic banking.
Many bank customers prefer using ATMs or a website
rather than visiting a branch, while technology has also
reduced barriers to entry for new customers.
CRM--A POWERFUL TOOL

CRM is a powerful management tool that can be

used to exploit sales potential and maximize the value of
the customer to the bank. Generally, CRM integrates
various components of a business such as sales,
marketing, IT and accounting. This strategy may not
increase a business's profit today or tomorrow, but it will
add customer loyalty to the business.

In the long term, CRM produces continuous

scrutiny of the bank's business relationship with the
customer, thereby increasing the value of the Customer’s
business. Although CRM is known to be a relatively new
method in managing customer loyalty, it has been used
previously by retail businesses for many years.

The core objective of modern CRM methodology

is to help businesses to use technology and human
resources to gain a better view of customer behavior.
With this, a business can hope to achieve better customer
service, make call centres more efficient, cross-sell
products more effectively, simplify marketing and sales
processes, identify new customers and increase customer
revenues.

As an example, banks may keep track of a

customer's life stages in order to market appropriate
banking products, such as mortgages or credit cards to
their customers at the appropriate time.

The next stage is to look into the different methods

customers' information are gathered, where and how this
data is stored and how it is currently being used. For
instance, banks may interact with customers in a
countless ways via mails, emails, call centres, marketing
and advertising. The collected data may flow between
operational systems (such as sales and stock systems)
and analytical systems that can help sort through these
records to identify patterns. Business analysts can then
browse through the data to obtain an in-depth view of
each customer and identify areas where better services
are required.

CRM AND BANKS

 One of the banks' greatest assets is their
knowledge of their customers. Banks can use this asset
and turn it into key competitive advantage by retaining
those customers who represent the highest lifetime value
and profitability. Banks can develop customer
relationships across a broad spectrum of touch points
such as at bank branches, kiosks, ATMs, internet,
electronic banking and call centres.

CRM is not a new phenomenon in the industry.

Over the years, banks have invested heavily in CRM,
especially in developing call centres, which, in the past,
were designed to improve the process of inbound calls.
In future, call centres will evolve to encompass more
than just cost reduction and improved efficiency.
According to Gartner Group, more than 80 per cent of all
US banks will develop their call centres as alternative
delivery channels and revenue centres, to be used for the
delivery of existing products and services.But to be
successful, a bank needs more than the ability to handle
customer service calls. It needs a comprehensive CRM
strategy in which all departments within the bank are
integrated.
3.2 OBJECTIVES OF CRM IN BANKS

CRM, the technology, along with human

resources of the banks, enables the banks to analyze the
behavior of customers and their value. The main areas of
focus are as the name suggests:customer, relationship,
and the management of relationship and the main
objectives to implement CRM in the business strategy
are:

• To simplify marketing and sales process

• To make call centers more efficient

• To provide better customer service

• To discover new customers and increase

customer revenue

• To cross sell products more effectively

The CRM processes should fully support the basic steps

of customer life cycle. The basic steps are:

• Attracting present and new customers

• Acquiring new customers

• Serving the customers

• Finally, retaining the customers

In today's increasingly competitive environment,

maximizing organic growth through sales momentum
has become a priority for Banks and Financial
institutions. To build this momentum banks are focusing
on Customer relationship management initiatives to
improve

• Customer satisfaction and loyalty

• Customer insight/ 360º view of customer

• Speed to market for products and service

• Increase products-to-customer ratio

• Improve up sales and cross sales

• Capitalizing on New market opportunities

The idea of CRM is that it helps businesses use

technology and human resources gain insight into the
behavior of customers and the value of those customers.
If it works as hoped, a business can: provide better
customer service, make call centers more efficient , cross
sell products more effectively, help sales staff close
deals faster, simplify marketing and sales processes,
discover new customers, and increase customer revenues
.It doesn't happen by simply buying software and
installing it. For CRM to be truly effective, an
organization must first decide what kind of customer
information it is looking for and it must decide what it
intends to do with that information.

For example, many financial institutions keep

track of customers' life stages in order to market
appropriate banking products like mortgages or IRAs to
them at the right time to fit their needs. Next, the
organization must look into all of the different ways
information about customers comes into a business,
where and how this data is stored and how it is currently
used.

One company, for instance, may interact with

customers in a myriad of different ways including mail
campaigns, Web sites, brick-and-mortar stores, call
centers, mobile sales force staff and marketing and
advertising efforts. Solid CRM systems link up each of
these points. This collected data flows between
operational systems (like sales and inventory systems)
and analytical systems that can help sort through these
records for patterns. Company analysts can then comb
through the data to obtain a holistic view of each
customer and pinpoint areas where better services are
needed.

In CRM projects, following data should be

collected to run process engine:

1) Responses to campaigns,

2) Shipping and fulfillment dates,

3) Sales and purchase data,

4) Account information,

5) Web registration data,

6) Service and support records,

7) Demographic data,

8) Web sales data.

3.3 NEED OF CRM IN BANKS

Bank merely an organization it accepts deposits

and lends money to the needy persons, but banking is the
process associated with the activities of banks. It
includes issuance of cheque and cards, monthly
statements, timely announcement of new services,
helping the customers to avail online and mobile banking
etc. Huge growth of customer relationship management
is predicted in the banking sector over the next few
years.

Banks are aiming to increase customer

profitability with any customer retention. This paper
deals with the role of CRM in banking sector and the
need for it is to increase customer value by using some
analytical methods in CRM applications. It is a sound
business strategy to identify the bank’s most profitable
customers and prospects, and devotes time and attention
to expanding account relationships with those customers
through individualized marketing, pricing, discretionary
decision making.

In banking sector, relationship management

could be defined as having and acting upon deeper
knowledge about the customer, ensure that the customer
such as how to fund the customer, get to know the
customer, keep in tough with the customer, ensure that
the customer gets what he wishes from service provider
and understand when they are not satisfied and might
leave the service provider and act accordingly.

CRM in banking industry entirely different from

other sectors, because banking industry purely related to
financial services, which needs to create the trust among
the people. Establishing customer care support during on
and off official hours, making timely information about
interest payments, maturity of time deposit, issuing
credit and debit cum ATM card, creating awareness
regarding online and e-banking, adopting mobile request
etc are required to keep regular relationship with
customers.
 The present day CRM includes developing
customer base. The bank has to pay adequate attention to
increase customer base by all means, it is possible if the
performance is at satisfactory level, the existing clients
can recommend others to have banking connection with
the bank he is operating. Hence asking reference from
the existing customers can develop theirclient base. If
the base increased, the profitability is also increase.
Hence the bank has to implement lot of innovative CRM
to capture and retain the customers.

There is a shift from bank centric activities to

customer centric activities are opted. The private sector
banks in India deployed much innovative strategies to
attract new customers and to retain existing customers.
CRM in banking sector is still in evolutionary stage, it is
the time for taking ideas from customers to enrich its
service. The use of CRM in banking has gained
importance with the aggressive strategies for customer
acquisition and retention being employed by the bank in
today’s competitive milieu. This has resulted in the
adoption of various CRM initiatives by these banks.

STEPS TO FOLLOW
The following steps minimize the work regarding
adoption of CRM strategy. These are:

Identification of proper CRM initiatives

Implementing adequate technologies in order to assist

CRM initiative

Setting standards (targets) for each initiative and each

person involved in that circle

Evaluating actual performance with the standard or

benchmark

Taking corrective actions to improve deviations, if

any

Customer Relationship Management is concerned with

attracting, maintaining and enhancing customer
relationship in multi service organizations. CRM goes
beyond the transactional exchange and enables the
marketer to estimate the customer’s sentiments and
buying intentions so that the customer can be provided
with products and services before the starts demanding.
Customers are the backbone of any kind of business
activities, maintaining relationship with them yield better
result.
3.4 CRM STRATEGIES

This is a new way of thinking for many banks

with thousands, even millions of customers. Managing
customer relationships successfully means learning
about the habits and needs of your customers,
anticipating future buying patterns and finding new
opportunities to add value to the relationship.

Customer Behavior Patterns

 For example, in the financial sector, early
beneficiaries ofsuccessful CRM strategies have been the
banks. These organizations use data warehousing and
data mining technologies to learn from the millions of
transactions and interactions with their customers, and to
anticipate their needs. The patterns of customer behavior
and attitude derived from this information enable the
banks to effectively segment customers on pre-
determined criteria.

Detailed customer data can provide answers to the

following questions:

• Which communication channel do they prefer?

• What would be the risk of leaving the bank to go

to the competition?

• What is the probability the customer will buy a

service or product?

This knowledge assists financial institutions with

CRM solutions in place to develop marketing programs
that respond to each customer segment, support cross-
selling and customer retention programs and enables the
staff to understand how to maximize the value of each
customer’s interaction.
 CRM applications provide functionality to
enhance customer interactions. Banks known for its high
level of customer service might use this characteristic as
a starting point for implementing a CRM application.
Another company may be very good at targeting
profitable customers. Each bank should seek a niche on
which to develop its CRM strategy.

Customer Data
A common problem many organizations share is
integrating customer information. When information is
disparate and fragmented, it is difficult to know who the
customers are, and the nature of their associations or
relationships. This also makes it difficult to capitalize on
opportunities to increase customer service, loyalty and
profitability. For example, knowing that other family
members are also customers provides an opportunity to
up-sell or cross-sell products or services, or knowing that
a customer uses several sources of interaction with a
supplier can also provide opportunities to enhance the
relationship.

The creation and execution of a successful CRM

strategy depends on close examination and
rationalization of the relationship between an
organization’s vision and business strategy.Building
toward a CRM solution and evaluating the use of
customer data requires analysis and alignment of the
following core capabilities:

• Customer value management

• Prospecting

• Selling

• Collection and use of customer intelligence

• Customer development (up-selling and cross-

selling)

• Customer service and retention

• Protection of customer privacy

Successful CRM implementations result from the

capability of the organization and its employees to
integrate human resources, business processes and
technology, to create differentiation and excellence in
service to customers, and to perform all of these
functions better than its competitors. The current
economic context and financial crisis has most probably
led many financial services institutions to refocus their
CRM strategies with the customer relationship being
more than ever the key to profitability of a retail activity.
These institutions have to design a new approach to
regain and reassure customers. Even if they have only
started building a “how to win back trust" strategy, there
is a general movement towards “refocusing on he
customer” for the “post-financial” crisis phase.

Here are some global banking institutions that have

deployed CRM Customer Relationship Management
systems, their CRM strategy and their goals.

Global Banks CRM Strategy Goal

Bank of AmericaProvide service representatives with
360-degree view of customer relationship for corporate
and retail banking Improve customer experience,
retention

FleetBoston Segment customer base into six different

groups based on demographics and banking behavior
Attain cross-sell revenues, maximum lifetime
value

BNP Paribas Deploy CRM system across branch

network, integrating with central office, link multiple
customer databases Improve customer experience, cross-
sell

Societe Generale Integrate call center, branch, and

central office; link 80 banking applications to support
unified view of customers Improve customer
experience, support consistent message

Irrespective of whether it is a public sector bank

or a private sector bank; a regional rural bank or a
foreign bank all banks commonly store details of tens of
thousands of customers and prospects - both in a
corporate database and in discrete documents on the
desktops of individual bank staff. Retrieving customer
data to support targeted marketing activities in this
environment has traditionally involved sorting hard copy
by hand, which is time-consuming, inaccurate, and
increasingly cost-prohibitive.
 Hence the banks devise software, which would mitigate
this task of customer relationship management solution,
to take full advantage of their valuable customer data. It
also provides a way to quantify a campaign's success and
aids in planning future marketing strategies, better work
flow tracking and management, considerable increase in
the speed of the marketing campaign planning process,
greater cost efficiency with improved ROI, easy
monitoring of multiple marketing campaigns and
improved workflow management.
CHAPTER-4

CUSTOMER

RELATIONSHIP

MANAGEMENT

IN

INDIAN BANKS
4.1CRM IN INDIAN BANKS

In recent years, the banking industry around the

world has been undergoing a rapid transformation. In
India also, the wave of deregulation of early 1990s has
created heightened competition and greater risk for
banks and other financial intermediaries. The

cross-border flows and entry of new players and

products have forced banks to adjust the product-mix
and undertake rapid changes in their processes and
operations to remain competitive. The deepening of
technology has facilitated better tracking and fulfillment
of commitments, multiple delivery channels for
customers and faster resolution of miscoordinations.

Unlike in the past, the banks today are market

driven and market responsive. The top concern in the
mind of every bank's CEO is increasing or at least
maintaining the market share in every line of business
against the backdrop of heightened competition. With
the entry of new players and multiple channels,
customers (both corporate and retail) have become more
discerning and less "loyal" to banks. This makes it
imperative that banks provide best possible products and
services to ensure customer satisfaction. To address the
challenge of retention of customers, there have been
active efforts in the banking circles to switch over to
customer-centric business model. The success of such a
model depends upon the approach adopted by banks with
respect to customer data management and customer
relationship management.

Over the years, Indian banks have expanded to

cover a large geographic & functional area to meet the
developmental needs. They have been managing a world
of information about customers - their profiles, location,
etc. They have a close relationship with their customers
and a good knowledge of their needs, requirements and
cash positions. Though this offers them a unique
advantage, they face a fundamental problem. During the
period of planned economic development, the bank
products were bought in India and not sold. What our
banks, especially those in the public sector lack are the
marketing attitude. Marketing is a customer-oriented
operation. What is needed is the effort on their part to
improve their service image and exploit their large
customer information base effectively to communicate
product availability. Achieving customer focus requires
leveraging existing customer information to gain a
deeper insight into the relationship a customer has with
the institution, and improving customer service-related
processes so that the services are quick, error free and
convenient for the customers.

Furthermore, banks need to have very strong in-

house research and market intelligence units in order to
face the future challenges of competition, especially
customer retention. Marketing is a question of demand
(customers) and supply (financial products & services,
customer services through various delivery channels).
Both demand and supply have to be understood in the
context of geographic locations and competitor analysis
to undertake focused marketing (advertising) efforts.
Focusing on region-specific campaigns rather than
national media campaigns would be a better strategy for
a diverse country like India.

Customer-centricity also implies increasing

investment in technology. Throughout much of the last
decade, banks world-over have re-engineered their
organizations to improve efficiency and move customers
to lower cost, automated channels, such as ATMs and
online banking. But this need not be the case.
 As is proved by the experience, banks are now
realizing that one of their best assets for building
profitable customer relationships especially in a
developing country like India is the branch-branches are
in fact a key channel for customer retention and profit
growth in rural and semi-urban set up. However, to
maximize the value of this resource, our banks need to
transform their branches from transaction processing
centers into customer-centric service centers. This
transformation would help them achieve bottom line
business benefits by retaining the most profitable
customers. Branches could also be used to inform and
educate customers about other, more efficient channels,
to advise on and sell new financial instruments like
consumer loans, insurance products, mutual fund
products, etc.

There is a growing realization among Indian

banks that it no longer pays to have a "transaction-based"
operating model. There are active efforts to develop a
relationship-oriented model of operations focusing on
customer-centric services. The biggest challenge our
banks face today is to establish customer intimacy
without which all other efforts towards operational
excellence are meaningless. The banks need to ensure
through their services that the customers come back to
them. This is because a major chunk of income for most
of the banks comes from existing customers, rather than
from new customers.

Customer relationship management (CRM)

solutions, if implemented and integrated correctly, can
help significantly in improving customer satisfaction
levels. Data warehousing can help in providing better
transaction experiences for customers over different
transaction channels. This is because data warehousing
helps bring all the transactions coming from different
channels under the same roof. Data mining helps banks
analyses and measure customer transaction patterns and
behavior. This can help a lot in improving service levels
and finding new business opportunities.

It must be noted, however, that customer-centric

banking also involves many risks. The banking industry
world over is being thrust into a wild new world of
privacy controversy. The banks need to set up serious
governance systems for privacy risk management. It
must be remembered that customer privacy issues
threaten to compromise the use of information
technology which is at the very center of e-commerce
and customer relationship management - two areas
which are crucial for banks' future. The critical issue for
banks is that they will not be able to safeguard customer
privacy completely without undermining the most
exciting innovations in banking. These innovations
promise huge benefits, both for customers and providers.
But to capture them, financial services companies and
their customers will have to make some critical
tradeoffs.

4.2 IMPORTANCE OF CRM IN INDIAN

BANK

For long, Indian banks had presumed that their

operations were customer-centric, simply because they
had customers. These banks ruled the roost, protected by
regulations that did not allow free entry into the sector.
And to their credit, when the banking sector was opened
up, they survived by adapting quickly to the new rules of
the game. Many managed to post profits. For them an
unexpected bonanza came from government bonds in
which most were hugely invested.

Ironically, the Reserve Bank of India's moves to

cut aggressively the interest rates after 1999, pushed up
the prices of bonds. So banks had a windfall doing
almost nothing. The bond profits, like manna from
heaven, improved the balance-sheets of all banks
irrespective of their core performance. However, the era
of lazy banking is soon to end. The mesh of rules that
propped up the Indian banking industry is now being
dismantled rapidly.

According to a RBI road-map, India will have a

competitive banking market after 2009. As one of the
most attractive emerging market destinations, India will
see foreign banks come in, what with more freedom to
come in, grow and acquire. Therefore, it is imperative
that Indian banks wake up to this reality and re-focus on
their core asset — the customer. A greater focus on
Customer Relationship Management (CRM) is the only
way the banking industry can protect its market share
and boost growth.

CRM would also make Indian bankers realize

that the purpose of their business is to "create and keep a
customer" and to "view the entire business process as
consisting of a tightly integrated effort to discover,
create, and satisfy customer needs."

What is CRM, and what will it deliver to the

banks? CRM is, probably, one of the least clearly
defined business acronyms, as there is no single
definition for it. It is probably easier to say what CRM is
not. Unfortunately, CRM has also become a misnomer
for a range of solutions from IT vendors, each providing
its own spin on the idea.

CRM is variously misunderstood as a fancy sales

strategy, an expensive software product, or even a new
method of data collection. It is none of these. Customer
Relationship Management (CRM) in the Indian banking
system is fundamental to building a customer-centric
organization. CRM systems link customer data into a
single and logical customer repository. CRM in banking
is a key element that allows a bank to develop its
customer base and sales capacity. The goal of CRM is to
manage all aspects of customer interactions in a manner
that enables banks to maximize profitability from every
customer. Increasing competition, deregulation, and the
internet have all contributed to the increase in customer
power. Customers, faced with an increasing array of
banking products and services, are expecting more from
banks in terms of customized offerings, attractive
returns, ease of access, and transparency in dealings.
Retaining customers is a major concern for banking
institutions which underscores the importance of CRM.
Banks can turn customer relationship into a key
competitive advantage through strategic development
across a broad spectrum. This book examines issues
related to changing banking industry in India and the
challenges in CRM.
 CRM is a simple philosophy that places the
customer at the heart of a business organization’s
processes, activities and culture to improve his
satisfaction of service and, in turn, maximize the profits
for the organization. A successful CRM strategy aims at
understanding the needs of the customer and integrating
them with the organization’s strategy, people, and
technology and business process. Therefore, one of the
best ways of launching a CRM initiative is to start with
what the organization is doing now and working out
what should be done to improve its interface with its
customers. Then and only then, should it link to an IT
solution.

While this may sound quite straightforward, for

large organizations it can be a mammoth task unless a
gradual step-by-step process is adopted. It does not
happen simply by buying the software and installing it.
For CRM to be truly effective, it requires a well-thought-
out initiative involving strategy, people, technology, and
processes. Above all, it requires the realization that the
CRM philosophy of doing business should be adopted
incrementally with an iterative approach to learn at every
stage of development.
4.3IMPLEMENTATION OF CRM IN
INDIAN BANKS
Although CRM as a concept is of recent origin
its tenets have been around for sometime. Field officers
in the banks have always promoted close relation-ship
with customers, but the focus on customer orientation
rather than product orientation as a commitment has
been on the Indian banking scene for nearly a decade.
But the fact remains that implementing customer
relationship management is not easy.

There are really very few organizations that are

actually optimizing customer experiences at all points of
contacts. It is necessary to understand who customers are
and what they value, select customer carefully, design
products and services that deliver the desired value,
design effective sales channels and customer touch
points, recruit and equip employees to deliver and
increase customer value, and constantly refine your
value proposition to ensure customer loyalty and
retention (Forsytyh 1997 and Goldenberg 1998).
 With the advancement of banking technology and
computerization and networking of bank branches,
banking customers are becoming more and more
dynamic and less loyal in their behaviour. The
development of the Internet is further adding to this
trend and the whole market becomes trans-parent and
customers are in a position to move easily from one bank
to another. In such a situation, customer satisfaction is
the key to bank marketing, which aims at retention of the
old customers and their bringing in new customers.

CRM deserves differential treatment to different

class of customers at times. Service can be given to
customers either personally through individuals such as
customer service manager or the process can be
automated by using computers. These different
approaches are adopted depending on the value of
relationship with the customer. Personal management of
relationship is extended to business customers and high
value personal customers and automated relationship
management to lower margin mass- market segments.

CRM system can open up new channels of

delivery, which are most cost effective. We can cite
example of the Internet and call centers. According to an
estimate, cost per transac-tion through these modes can
be reduced by 90 per cent when compared to cost of
transaction at branch. To offer better and extended
services to custom-ers new technology platforms are
being created through huge investment in Information
Technology in banking sector. The recent development
in this field is the introduction of CBS (Core Banking
Solutions). A CBS helps in centralizing the transactions
of branches and different banking channels and the
customers start banking with the bank instead of at
different branches. This is the only way to offer seamless
transactions across different channels (branches, the
Internet, the telephone and Automated Teller Machines
or ATMs). As such nowadays a customer is called a
customer of the bank rather than of a branch.

Another problem generally faced by a bank in

implementing CRM is resistance to change. The banking
industry is passing through a radical transformation,
from a sellers market to a customers market, a regulated
economy to a more liberalized and open economy,
advancement in technology and a lot of other
developments. These complex changes are forcing the
banks to change the way they do business. A change
denotes making things in a different manner. It should be
planned properly, proactive and goal oriented. It requires
two things:
 Firstly, the ability of the organization to adapt
changes in the business environment is to be increased.
Secondly, the mindset of the employees has got to be
changed in the development of right attitude, skills,
expectations, perceptions and behaviour. Implementation
of CRM in Indian banking is still in its initial stage and
has to go a long way to develop and raise it to the global
standards. But the Indian banks including the public
sector banks are coming in a big way to address this
issue to remain competitive with their counterparts—the
foreign and private sector banks.

4.4 CUSTOMERS RELATIONSHIP MANAGEMENT–

A NEW MANTRA IN INDIAN BANKING

Nowadays banks have to work keeping in mind

the position of the financial market and anticipate change
in the market place and prepare themselves accordingly.
They have to make new resolutions to build further on
their own strengths to explore new avenues of Customers
Relationship Management. This is the only strategic
weapon to be pursued for excellence in the pursuit of
performance and achievement. Both the retention of old
business as well as to search for new business, CRM is
the only choice. CRM, being the essence of modern
banking, a sound understanding of the key principles, its
theories and practices should be revisited and redefined
to provide a road map to new ideas and techniques in the
field. Over the years, banking institutions have been
feeling the pressing need of putting up greater thrust on
this initiative for improving their operations and
appearances.

4.5 CRM PRINCIPLES

The main principles of CRM can be grouped into seven

guiding factors:

1. Customer focus

The first and foremost important guiding

principle in CRM is customer focus. Who is a customer?
This question is very fundamental. A customer is a
person or group of persons who receives the product or
service—the final output of a process or group of
processes. A customer is the final arbiter of quality,
value and price of a product or service. A satisfied
customer only assigns value to a service, on the contrary,
to a dissatisfied customer a product or service has no
value, even if the concerned service or product has been
designed with lot of effort, energy and cost after a
thorough planning.
 A satisfied customer motivates his fellow
members to go in for the service or product that he has
already acquired. But a dissatisfied customer always
counsels his friends, and fellow members not to go to
banks where his experience proved to be wrong or other-
wise. So customer’s delight or customer’s satisfaction is
the essence of any CRM program. As a part of this focus
on customers, banks should ensure that clients are
identified; their requirements are determined, understood
and met enhancing customers’ satisfaction.

The main thrust of CRM is to improve an

organization’s efficiency, economy and effectiveness
through reduction of sales cycle times and selling costs,
identification of new markets and channels for
expansion, improvement of customer value, satisfaction,
retention and thereby increasing profitability and market
share of the enterprise. Successful CRM focuses on
understanding the needs and desires of the customers and
is achieved by placing these needs at the heart of the
business by integrating them with the organization’s
strategy, people, technology and business processes.
(Heygate, 1999). There must be total commitment for the
enterprise towards this end.
2 Leadership

Persuasion, judgment and decision-making

abilities are the main attributes of quality leadership.
When there is a slight chance of getting a business but
the client is hesitating or in a fix, or not in a position to
decide properly, it should be followed up by the
relationship manager by patient hearing, mild counseling
and to stand by the side of the prospective client to help
clear his doubts and to make him feel happy by realizing
that he is going in the right direction and he is very right
in choosing his requirements.

The following points may be found helpful in this

regard:

(a) It is to be communicated to all employees that all

customers should be given a proper hearing and it should
be supported from all levels.

(b) Ways and means should be identified and practiced

of getting and staying closer to customers.

(c) Proper respect should be extended to the customers.

All relevant information should be collected from them
with humble and polite approach. Proper value should be
given to their feedback.

(d) There should be proper re-action to the information

and feedback provided by the customers in designing,
developing and providing desired products at afford-able
cost.

3. Process approach

A process transforms an input into desired output

by the use of resources, energies and time. In producing
an output there may one single process or a group of
inter-related processes. In case of inter-related processes,
often the output from one process directly forms the
input to the next. For effective functioning of an
organization, it has to identify and manage numerous
linked activities with the help of different processes for
accomplishing its goal.

Proper attention should be given to the following points:

(a) All processes should be de-signed keeping in view

the requirements and desires of the customers, within the
policy, resource availability, strategy of the company.

(b) All processes should meet the legal and statutory

requirements to perform the activity or deliver the
product or service.

(c) Time involved in processing should be minimum

with least waiting time to the customers. If required
delegation of authority and assignment of account-ability
at various executive levels should be addressed, revised
and fine-tuned to meet the requirements.

(d) All the processes should be properly integrated to

meet the goal congruence and should not function at
cross-purpose.

(e) There should be in built control mechanism for ease

of measuring, reviewing and taking corrective action.

4. System approach

Customer’s requirement is one level of

commitment. That level implies a system that is reactive
and provides to customers what they want but the target
should be to achieve more and to exceed the customer’s
expectation to accommodate future requirement and to
build a cushion against the competitors’ attributes.

CRM denotes the management of the entire

system and is not confined to only one or the other sub-
systems or functional departments. CRM is based on a
system approach to management. Its primary objective is
to increase value to customers on a continuous basis by
designing and improving organizational processes and
systems on a ongoing basis. Meeting Each sub-system
may have its own goal but the goal and objectives of all
sub-systems are to be integrated to achieve the overall
goal.

There may be one sub-system to acknowledge

the customer’s order, a separate one to deliver the
product within the delivery schedule, another sub-system
to comply with the complaints of the customers etc, but
all directed to accomplish the goal—value to the
customers. The total system as a whole should decide
what product to make or what service to offer, what
should be the quality involved, what should be the price,
what markets and customers to target upon and similar
other issues.

5. Involvement of people

The fundamentals of CRM bear the genes of

customer relationship through involvement of people,
i.e., the work-force at the disposal of the organization.
The whole gamut of CRM is for the people, of the
people and by the people. People involvement at all
levels is essential for the success of a CRM program.
The bank managers and staff must be in a position to
exploit the concept of customer relationship completely.

Customer relation may be defined as that

dimension of relationship marketing that seeks and
ensures customer loyalty by fulfilling promises and
continuing to satisfy customer’s wants and needs so that
defection is zero. It comprises of three levels of
relationships; financial relationship, social relationship
and structural relationship.

The main focus of financial relationship is

frequency marketing programs based on financial
incentives such as reduction of processing fees, lower
rate of commitment charges, organization of loan mela
on special occasions etc. A social relationship program
revolves round a social bonding between company and
its customers and establish brand loyalty. Bankers,
nowadays, make house calls, offer different services
outside their for-mal activities, share the feelings and
emotions of clients and even send clients flowers on
birthdays and anniversaries. A marketing relation with
the middleman and interested groups is developed in an
in-side-out manner mainly based on software, which
would help in data warehousing, data mining and data
analysis. The optimization of structural relationship lies
in the replacement of physical resources by total service
replacement.

Drawing of money through ATMs instead of

physical presence in the branch for withdrawal of cash
through cheques or withdrawal forms may be sited as
example. To obtain the full benefits of people
involvement, the human resource management should
focus on employee empowerment, productivity linked
reward, zero defeat service oriented train-ing and total
quality management.

6. Mutually beneficial customer relationship

The relationship with the customer should be

based on a mutually beneficial relation-ship. A bank
should not concentrate its attention towards earning of
profits only, but focus should be directed to the
customers’ wealth creation or value enhancement with
the motto of earning through service.

As an example we can talk of a savings account

that’s ‘fixed up’ to give you more interest. It ensures that
any balance in your savings account above a certain
amount, say, Rs 3,000 automatically gets transferred to a
fixed deposit to give you higher returns, which will be
swept back into your savings account, when you need it.

Sometimes, other benefits are also extended,

such as, free personal accident insurance coverage along
with fixed deposit scheme above a certain amount and
above a certain term. Banks are no more restricting their
activities to deposit and advances; rather they work with
the mot-to of offering ‘Integrated Total Package
Solutions to all needs of a customer. Banks have gone to
the extent of booking cinema tickets, paying utility bills,
school fees etc. for the ease of their clients who are very
busy and do not find time for such work. Many of such
activities are not profitable in terms of time and efforts
spend by the bank. But banks are carrying out such
services for mutual benefits, which pays in the long run.

Wealthy individuals are in the habit of placing

all sorts of demands on their private bankers and a bank
has to respond to such requests not merely for income
generation but as a gesture of goodwill and at times such
activities add a consider-able percentage to a bank’s fee
based income. According to an estimate, a bank can earn
Rs 35,000 to Rs 100,000 per an-num for a good
customer. But generally it is found that earnings start
after the first two- three years of dealing with the
customer. In a mature relation-ship, such fee-based
income is a regular feature and is very much crucial in
today’s banking where interest spread is getting reduced
due to competition and fee based income can increase
the bottom line. But in many instances, the expenses in
terms of time, effort, recognizing individual needs and
offering a customized investment solution are high.

Retention of customers and building a long

lasting relationship is the main criteria under this
concept.
7. Continual improvement

Another objective of CRM is the efforts towards

continuous improvement in the customer relationship
through the provision of value added ser-vices at
favorable cost. Business processes in the areas of
finance, system integration, human resource
management etc. are to be automated and optimized with
an aim to increase the efficiency and effectiveness of
operations.

The most effective way of improvement lies in

innovation and change management. Today’s successful
organizations must stimulate and foster innovation and
master the art of change. Organizations that maintain
their flexibility, spontaneity and unpredictability,
continually improve their quality and, beat their
competitors to the market place with a constant stream of
innovative products and services, will be the winners.

The major areas to be targeted are:

(i) Improving the effectiveness of marketing.

(ii) Implementing multichannel trigger driven

marketing.

(iii) Implementing a strategic analysis capability

to support strategic decision making.
(iv) The ability to deliver the increasing levels
service demanded by customers.

Building a transparent communication system and

employee participation to better define the needs of the
customers and deliver the right services and products
CHAPTER-5

BENEFITS OF CRM
BENEFITS OF CRM TO BANKS
Despite the fact that in most banks profits
sometimes fail, they seldom pay attention to or adopt any
customer strategy. It has long been the misconception
that banks need not pay much attention to customer
focus just because they had customers. Some banks even
if they possess good customer relationships are unable to
cross sell as they have not figured out who to target with
what product/service. What happens is that customers
are often approached for the wrong products.

However the new millennium has resulted in

banks and financial agencies rethinking their strategies
and goals. They have come to understand the importance
of hanging onto the customer and keeping him happy.
The rules that once governed the banking industry have
changed. They have realized that adopting a customer
centric strategy is essential and needs to be compulsorily
undertaken. The vast majority of banks now realize they
need a customer strategy and are opting for CRM -
Customer Relationship Management.

Banking CRM software serves to increase the

market share and boost growth in the banking industry.
What happens in CRM banking solutions is that they
change the way the employees think and mould them
into customer conscious people. CRM induces bankers
to know that they are required to maintain good
relationships with their customers and should strive to
retain them.
 They are made to realize that the business
process should consist of efforts to discover and satisfy
customer requirements. Since the banking field now
boasts of so much of technological innovations there has
been a wide variety of innovations in CRM banking as
well. Statistics show that bankers will spend $7 billion
on CRM. The sector will also evidence an increase in
expenditure of 14 percent each year. With such
phenomenal statistics it is but a surety that CRM banking
solutions sales will soar in the coming years.

FOLLOWING ARE THE BENEFITS OF

CRM TO BANKS:

1. CRM Banking Focuses on the Customer

CRM manages to places the customer at the focal

point of the organization in order to cater to his needs,
satisfy him and thus maximize the profits of the
organization. Banking CRM understands the needs of the
customer and integrates it with people, technology,
resources and business rocesses. It focuses on the
existing data available in the organization and uses it to
improve its relationship with customers. Banking CRM
uses information and analytical tools to secure customer
focus. Thus it is completely essential that banks
implement CRM in order to secure this.

2. Overall Profitability

CRM enables banks to give employee's

better training that helps them face customers easily. It
achieves better infrastructure and ultimately contributes
to better overall performance. The byproducts of CRM
banking solutions are customer acquisition, retention and
profitability. Banks that don't implement CRM will
undoubtedly find themselves with lesser profitability
coupled with a sharp decline in the number of customers.

3. Satisfied Customers

It is important to make a customer feel as if he /

she is the only one - this will go a long way in satisfying
and retaining them. Bankers need a return on investment
and it has been proved that increase in customer
satisfaction more than contributes a fair share to ROI.
The main value of CRM banking lies in satisfaction and
increased retention of customers.
4. Centralized Information

CRM banking solutions manage to clearly

integrate people, processes and technology. CRM
banking provides banks with a holistic view of all bank
transactions and customer information as well and stores
it in a single data warehouse where it can be studied
later.

5. CRM Banking Boosts Small Banks

Banking CRM software meets the needs of banks

of all sizes in terms of attaining the required accuracy
and understanding of customers. Merely assuming that
banks that are considerably smaller in size have a better
customer approach and are able to deal with their
customers in a better manner is wrong.

They are just as much in need of CRM aid as the

others. Small banks on account of a limited amount of
money have had to realize that a large contribution to
profits is directly the result of good customer service.
CRM makes sure that the bank delivers exactly what the
customer expects.

6. Customer Segregation

CRM enables a bank to see which customers are

costing them and which are bringing benefits. CRM
provides them with the required analytical tools that will
help them focus on the importance of segregating these
two and doing what is required to avail of the maximum
returns.

After this segregation is done CRM easily

enables banks to increase their communication and
cross-selling to their customers effectively and
efficiently.

7. Aggressive Customer Acquisition

CRM solution supports the creation of demand

generation through multi-channel and multi-wave
campaigns. The solution ensures the bank’s marketing
message is appropriately personalized and targeted
towards the most suitable segment of prospects. This
optimizes marketing efforts and results in greater
conversion of prospects
8. Improved Cross-sell Framework

The solution presents a unified 360° view of the

customer, allowing single point access to all the
relationships the customer has forged with the bank. This
along with robust customer analytics effectively supports
true relationship banking, providing a robust framework
for cross-sell opportunities.

CRM solution also integrates with other white

labeled solutions to facilitate contextual and personalized
customer engagement, with a keen focus on right-talk
driven right-sell.

9. Increased Operational Efficiencies and

Collaboration

CRM solution supports business automation for

processes and business activities, eliminating manual
tasks and reducing process time. Straight through
processing abilities enhance reduction in turnaround and
processing time, increasing output and enabling speedy
completion of tasks. The multilingual Web-based single
repository of information enables remotely located
bankers to collaborate and transact seamlessly.
10. Lower Total Cost of Ownership (TCO)

A Web-based solution leveraging new-generation

technologies, Finacle CRM solution is future-proof and
can be seamlessly integrated with other enterprise
applications. With a robust architecture and proven
scalability, it ensures protection for the bank’s
technology investments.

11. Campaign Management

Banks need to identify customers, tailor products

and services to meet their needs and sell these products
to them. CRM achieves this through Campaign
Management by analyzing data from banks internal
applications or by importing data from external
applications to evaluate customer profitability and
designing comprehensive customer profiles in terms of
individual lifestyle preferences, income levels and other
related criteria.

Based on these profiles, banks can identify the

most lucrative customers and customer segments, and
execute targeted, personalized multi-channel marketing
campaigns to reach these customers and maximize the
lifetime value of those relationships.

12. Customer Information Consolidation

Instead of customer information being stored in

product centric silos, (for e.g. separate databases of
savings account & credit card customers), with CRM the
information is stored in a customer centric manner
covering all the products of the bank. CRM integrates
various channels to deliver a host of services to
customers, while aiding the functioning of the bank.

13. Marketing Encyclopedia

Central repository for products, pricing and

competitive information, as well as internal training
material, sales presentations, proposal templates and
marketing collateral.

14. 360-degree view of company

This means whoever the bank speaks to,

irrespective of whether the communication is from sales,
finance or support, the bank is aware of the interaction.
Removal of inconsistencies of data makes the client
interaction processes smooth and efficient, thus leading
to enhanced customer satisfaction.

15. Personalized sales home page

CRM can provide a single view where Sales

Mangers and agents can get all the most up-to-date
information in one place, including opportunity, account,
news, and expense report information. This would make
sales decision fast and consistent.

16. Lead and Opportunity Management

These enable organizations to effectively manage

leads and opportunities and track the leads through deal
closure, the required follow-up and interaction with the
prospects.

17. Operational Inefficiency Removal

CRM can help in Strategy Formulation to

eliminate current operational inefficiencies. An effective
CRM solution supports all channels of customer
interaction including telephone, fax, e-mail, the online
portals, wireless devices, ATMs, and face-to-face
contacts with bank personnel. It also links these
customer touch points to an operations center and
connects the operations center with the relevant internal
and external business partners.

18. CRM with Business Intelligence

Banks need to analyze the performance of

customer relationships, uncover trends in customer
behavior, and understand the true business value of their
customers. CRM with business intelligence allows banks
to assess customer segments, which help them calculate
the net present value (NPV) of a customer segment over
a given period to derive customer lifetime value.
Customers can be evaluated within a scoring framework.
Combining the behavior key figure and frequency to
monetary acquisition analysis with a marketing revenue
quota can optimize acquisition costs and cut the number
of inefficient activities. With such knowledge, banks can
efficiently allocate resources to the most profitable
customers and reengineer the unprofitable ones. Data
warehousing solutions have been implemented in
Citibank, Reserve Bank of India, State Bank of India,
IDBI, ICICI, Max Touch, ACC, National Stock
Exchange and PepsiCo.
5.2 BENEFITS OF CRM TO CUSTOMERS

Customer relationships are becoming even more

important for banks as market conditions get harder.
Competition is increasing, margins are eroding,
customers are becoming more demanding and the life-
cycles of products and services are shortening
dramatically. All these forces make it necessary for
banks to intensify the relationship with their customers
and offer them the services they need via the channels
they prefer.

CRM helps banks to provide lot of benefits to their

customers; some key benefits are as follow.

► Service provisioning throughout the entire life cycle

of the corporate customer, from the initial stages to the
establishment of a close, long-term relationship with
profitable clients,

► Optimization of the use of bank resources, such as

alternative channels of distribution (internet and home
banking),
► Significant reduction in and limitation of operational
costs through system automation and standardization,

► Low maintenance and expansion costs owing to the

use of modern administration tools which allow bank
employees to make a wide range of modifications to the
system

► CRM permits businesses to leverage information

from their databases to achieve customer retention and to
cross-sell new products and services to existing
customers.

► Companies that implement CRM make better

relationships with their customers, achieve loyal
customers and a substantial payback, increased revenue
and reduced cost.

► CRM when successfully deployed can have a

dramatic effect on bottom-line performance. For
example, Lowe’s Home Improvement Warehouse, in a
span of 18 months, achieved a 265 percent return on
investment (ROI) on its $ 11m CRM investment.

► According to a study conducted in the sector of

banking, convenience of location, price,
recommendations from others and advertising are not
important selection criteria for banks. From customers’
point of view, important criteria are: account and
transaction accuracy and carefulness, efficiency in
correcting mistakes and friendliness and helpfulness of
personnel. Thus, CRM, high-quality attributes of the
product / service and differentiation proved to be the
most important factors for customers.

► Another study conducted in a European bank shows

that with CRM, the bank was able to focus on profitable
clients through efficient segmentation according to
individual behavior. Information about ‘who buys what
and how much’ enabled the bank to have a commercial
approach based on the client and not solely on the
product. Thus, the bank was able to better satisfy and
retain its customers.

Eventually, CRM results both in higher revenues and

lower costs, making companies more effective and
efficient: effective in targeting the right customer base
with the right services via the right channels, and
efficient in doing this at the lowest costs. For example,
those banks that are moving transactions from the more
expensive channels to a less costly channel – like the call
centre or Internet– are therefore able to save money.
CHAPTER -6

CHALLENGES

FOR

CRM

IMPLMENTATION
6.1CHALLENGES FACED BY BANKS IN
SUCCESSFUL IMPLEMENTATION
OF CRM
The most pervasive challenges to effective customer
knowledge include:

► The difficulty of obtaining a complete view of

customers.
► The need to move away from disjointed, standalone,
and inconsistent channels to provide a cohesive,
multichannel offering.

► The burden of disconnected legacy systems and

disparate databases that store client financial data.

► The cost and complexity of meeting stringent

government regulatory and client security and privacy
requirements.

► The pressure on margins and growth prospects from

increased competition.

► The costs associated with retaining customers and

developing customer loyalty.

Although CRM can help banking institutions

efficiently manage their customers, many banks fail to
meld the concept into the prevailing work culture. But
the high incidence of CRM failure has very little to do
with the CRM concept itself. Usually it's a case of the
banks failing to pay attention to customer data they
already have.

A lot of banks underestimate the magnitude of

CRM. They tend to treat it just like any other application
technology, without realizing that CRM, if done
properly, is a strategic initiative that touches all areas of
an organization. According to CRM software firm
People soft, banks need to be aware of three key
problems:

1. Measuring CRM benefits

A key basic CRM challenge is establishing the

measurement method. Banks may find it hard to build
the initial business case justification and then to prove
the worth or success of their investment What makes the
latter task even more difficult is the fact that the metrics
that are best used to justify a significant IT investment
are not always the most appropriate for evaluating
ongoing success.
 When banks seek to justify the cost of their
investment in CRM-related technology they usually
focus on hard numbers, typically those related to
decreased costs and increased sales. In other words, the
proponents look to justify the top-line expenses with
bottom-line benefits.

Traditionally, banks have determined the success

of any project or product mainly in terms of internal
business gauges such as return on investment, units sold
asset growth, or service level agreement measures. One
exception to the typical practice of focusing solely on
internal data for gauging success is market share, or
market performance. Interestingly, most CRM
practitioners quickly default to marketing and sales
measures when asked about the success of CRM
implementations. The tendency to frame the discussion
of CRM measurements in terms of sales and marketing
measures is completely understandable given the phased
nature of most CRM projects.

Since the majority of CRM projects are

expensive multiphase and multiyear projects that often
involve multiple technologies, the funding for CRM
projects is also often phased. CRM sponsors grant
funding to project leaders at the completion of one phase
and start of the next. To ensure that the subsequent
phases will get funding, project leaders typically build
into each phase of a CRM project demonstrable business
benefits.

At completion of each phase of a project,

business benefits are expected to accrue rapidly to the
bank. Revenue generation--whether through sales or
marketing improvements--is the preferred business
benefit for CRM project sponsors. Not surprisingly, it is
far easier to continue funding large, intricate IT projects
when incremental revenue generation can be squarely
identified.

2.Customer profitability

Many banks use profitability as a key component

in determining how to treat their customers. But
measuring profit in a bank is not an easy task. Many
banks allow the use of an accountant's approach to the
measurement process. This means the accounting and
finance people are in charge of the process, resulting in
textbook-accurate allocations that often do not accurately
reflect the activities they are intended to measure.
 For example, most bank costs are step-fixed. This
means they are neither purely fixed nor purely variable,
with the resource able to process only a finite number of
transactions before more investment is required. The
way the step-fixed resources are allocated can
dramatically affect the resulting measurement of account
level profitability.

3. The 80-20 Rule

Most banks make critical pricing decisions based

on the so-called 80-20 rule, the notion that 80 per cent of
profits derive from 20 per cent of customers. This may
be true, but the use of incomplete or inaccurate cost
information and unproven hypotheses on customer
buying behavior make this rule difficult to apply. One
significant problem is that banks let their customers use
the bank's products and services in an unprofitable way.
 By providing a lower level of service to these
customers, the bank faces the danger of driving them
away to institutions that provide better service. Given the
step-fixed nature of bank costs as discussed, banks
should not view losing unprofitable customers as the
way to improved profits.
6.2 METHOD OF EFFECTIVE CRM
IMPLEMENTATION

Banks can take several steps to strengthen their

customer relationship management in an effective
manner.

1. Acknowledge email enquiries

At the very minimum, banks should send out an

automated email response that acknowledges receipt of a
customer's email and lets the sender know when to
expect a more complete response.

It is then vital to get back to the customer within

the promised time frame. Banks can earn more customer
goodwill if they respond faster than the imposed
deadline. To handle significant volumes of email, banks
need adequate routing technology. Many banks regard a
voice call centre as a cost of doing business, but they
don't look at it the same way with email.

2. Develop the right contact strategy

By knowing which offers and incentives to offer

to which customers and when, banks will not annoy
customers with unwanted marketing offers, building
customer loyalty along the way. Such goals can be at
least as important as realizing cross-sell opportunities.

3. Providing online `chatting'

An alternative to telephone support, online

chatting is providing a service via emails or any other
form of immediate response. This service also offers
some of the immediacy of the phone but primarily
allows customers to remain online. With online chatting,
service agents can usually handle between one and three
customer inquiries at once.

Given that the average call lasts about four

minutes, a customer-service representative can handle 10
to 12 customers per hour using "chat", compared with
six to eight per hour over the telephone. One of chat's
important advantages is that it keeps customers in an
online store environment where they remain exposed to
merchandise and promotions.

4. Reduce costs by improving website design and self-

service

Email, telephone support, and chat all involve

considerable staffing costs. But to reduce these expenses
a site should anticipate customer needs. Sites that is
difficult to navigate and don't provide needed
information chase away some customers and force those
who stay to resort to more expensive channels to satisfy
their service needs.

5. Analyses the project's scope

 Before recommending or embracing CRM, bank
executives must analyses the business issues, the
customer relationship model and the exact nature of
customer interactions and how they tie together. Banks
should not embrace top-line growth as an objective until
they can understand precisely how CRM technology will
provide those new revenues.

6. Know the limitations

Many CRM implementations are severely limited

because they fail to provide a complete and meaningful
view of the customer. CRM is primarily a business
program, and it requires a genuine partnership between
various departments to ensure that both business and
technology issues are managed effectively.

Furthermore, CRM not only takes existing

business processes and makes them more efficient, but it
also requires these processes to be modified. For a CRM
implementation to be successful, decision makers within
the bank need to make sure that all the stakeholders
understand and support the required process changes.
7. Change accounts into customer

Traditionally banks have closely associated

customers with accounts, to the point of calling the
account the customer and vice versa. Customers will
tend to feel alienated when they are treated like a number
instead of a person. A conventional account structure
usually contains very little information about customers
and their needs, or their relationship with competitors or
other divisions within the bank.

The way ahead Banks have excellent reasons to

adopt comprehensive CRM strategies to cultivate a
lifetime customer relationship. As banks move from
transaction-centric to a relationship-centric business
approach, effective leveraging of customer relationship
becomes all the more critical.

Today, customers are expecting even more

individual attention, responsiveness and product
customization, yet are unwilling to pay a premium for
these services. They are willing, however, to build a
long-term relationship with banks that offers
differentiated and more personalized services.

This is where electronic banking can offer a

competitive advantage. Successful CRM implementation
in electronic banking needs to integrate data from all
customer touch points, employee feedback and even
shareholders' perceptions. If used effectively and in an
innovative way, this approach will enable banks to
develop a strategy to deliver to the customer the most
appropriate products and services.
RECOMMENDATION

Customer Relationship Management (CRM), the

most exciting strategies that emerged from networking
technology revolution of the nineties, is today fast
emerging s one of the most important cooperates
strategies. A well-executed Customer Relationship
Strategies can result in number of quantitative benefits,
including greater ability to sell and cross sell, improved
retention besides cost of services.
 Customer Relationship Management is do-able.
However the following must take into consideration
before embarking upon its implementation. All aspects
of customer relationship management, including
technology solution, must be fully explored effectively
deliver the competencies required to realize the business
benefits.

1. Tackling any one competence alone will lead to a

dysfunctional business. One competence does not
customer relationship management make.

2. Take pragmatic steps with a clear view on delivery

of all the components in the medium term, rather than
piecemeal in the short term.

3. Successful mass customization is crucial to

reducing customer acquisition cost and improving the
cross selling capacity.

4. Channels are a delivery mechanism. The

effectiveness of the mechanism is achieved when it is
faultless!

5. 75% of all Customer Relationship Management

projects have failed due to lapses in implementation.
Technology is not enough, implementation is the key
and this is where the people aspect comes into the
forefront.

6. Customer Relationship Management

implementation is effective when companies are able to
identify the internal and external customer and integrate
them with its core business process.

CONCLUSION

Banking can be mysterious for consumers and

how they interact with their finances can be a complex
matter. The challenges faced by banks and their
customers are many but the trick lies in de-mystifying
complex financial relationships.

Technical solutions deployed by banks today are

flexible, user-friendly and meant to facilitate specific
workflow and requirements in implementation processes.
In order to simplify lives, banks have begun to
implement end-to-end technologies through all
departments with the intention of removing human error
from processes. Previously existing manual
environments could not have been adequate for future
visions, growth plans and strategies.

In this day and age, customers enjoy complete

luxury in terms of customized technical solutions and
banks use the same to cement long-term, mutually-
beneficial relationships. For a bank to succeed in
adopting a CRM philosophy of doing business, bank
management must first understand CRM as a holistic
concept that involves multiple, interlocking disciplines,
including market knowledge, strategic planning,
business process improvement, product design and
pricing analysis, technology implementation, human
resources management, customer retention, and sales
management and training.

Turning the business strategy into actionable items is a

difficult undertaking. For which Customer Relationship
Management works a magic wand.
 BIBLIOGRAPHY

BOOKS
• Customer Relationship Management-Mohamed HP

• Marketing Management-Philip Kotler

NEWSPAPERS
• Times of India

• Hindustan Times

WEBLOGRAPHY
• www.crm.com

• www.businessline.com

• www.customerrelation.com

• www.marketing.com